Investing in our securities involves risks. Before making an investment decision, you should carefully consider the risks described below. Any of these risks could result in a material adverse effect on our business, financial condition, results of operations, or prospects, and could cause the trading price of our securities to decline, resulting in a loss of all or part of your investment. The risks and uncertainties described below are not the only ones we face, but represent those risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

Risks Related to Our Business and Industry

Macroeconomic fluctuations may harm our business, results of operations and stock price.

Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, levels of consumer and business confidence, commodity prices and availability, inflationary pressure, exchange rates, levels of government spending and deficits, political conditions, and other challenges that could affect the global economy including impacts associated with the continuing developmnetsdevelopments in the war against Ukraine and sanctions which have been announced by the United States and other countries against Russia, which have caused significant uncertainty, adding to continuing concerns about supply chain disruptions, inflation and increases in interest rates in the markets in which we operate. These economicSimilar geopolitical tensions and geopolitical conditionspolitical and/or armed conflicts, including tensions between the U.S. and China, China and Taiwan, and the conflict between Israel and Palestine could affect businesses such as ours in a number of ways.adversely impact our financial performance and global operations. Such conditions could have an adverse impact on our flexibility to react to changing economic and business conditions and on our ability to fund our operations. In addition, restrictions on credit availability could adversely affect the ability of our customers to make payments. Similarly, credit restrictions may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress.

Inflation and rising interest rates may adversely affect our financial condition and results of operations.

During 2022,2023, inflation in the United States accelerated and,moderated but, as of the date of this Report, is currently expected to continue at an elevated level in the near-term. RisingElevated inflation may have an adverse impact on our Loan Agreement (as defined in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report below) and general and administrative expenses, as these costs could increase at a rate higher than our revenue. The U.S. Federal Reserve raised the federal funds rate a total of sevenfour times throughout 2022,2023, with its most recent increase in July of 2023, resulting in a range from 4.25%5.25% to 4.50%5.50% as of December 31, 2022. It is expected2023. Although there are expectations that the U.S. Federal Reserve may continue to increasewill begin reducing the federal funds rate during 2023in 2024, these expectations may not materialize. Should the U.S. Federal Reserve continue to raise rates in the future to, among other things, control inflation. As a result,inflation, or if rates continue at an elevated level, to the extent our exposure to increases in interest rates is not eliminated through interest rate swaps or other protection agreements, such increaseselevated rates may result in higher debt service costs, which willwould adversely affect our cash flows.

Our variable rate indebtedness subjects us to interest rate risk and could cause our debt service obligations to increase significantly.

Amounts outstanding under our Loan Agreement bear interest at the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.25%, with a SOFR floor of 0.00%. Variable rate borrowings expose us to potential increased interest expense in a rising interest rate environment.environment, if we utilize the line of credit. If interest rates were to increase, our debt service obligations on variable rate indebtedness would increase even though the amount borrowed remained the same, which could adversely affect our cash flows. As of December 31, 2023 and 2022, we had no outstanding balances under the line of credit.

The effects

The COVID-19 pandemic has had and may continue to have an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. The COVID-19 pandemic continues to present business challenges, and we continue to experience impacts related to COVID-19, primarily in higher raw material prices, disruptions in global supply chains, delays in supplier deliveries, delays in deliveries to customers, travel restrictions, quarantine restrictions, labor shortages and employee absences. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences remain uncertain and rapidly changing, it is difficult to predict the extent of the pandemic’s impact on our operations and financial performance. Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not

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limited to, duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variantsand the possible resistance of new variants to currently available vaccines, the effectiveness and adoption of COVID-19 vaccines and therapeutics, governmental, business and individuals’ actions that have been and may in the future be taken in response to the pandemic (including shutdown orders, border closings, restrictions on travel and transport and workplace restrictions) and resulting supplier impacts. In addition, to the extent global vaccination programs do not achieve intended results and a longer period of economic and global supply chain and related disruption continues, the more adverse the impact will be on our business operations, financial performance and results of operations.

We are dependent on a single line of business.

We are engaged only in the design, manufacture and marketing of standard and custom-engineered electronic components that are used primarily for the control of frequency and spectrum of signals in electronic circuits. Virtually all of our 20222023 and 20212022 revenues came from sales of electronic components, which consist of packaged quartz crystals, oscillator modules, electronic filters and integrated modules.

Given our reliance on this single line of business, any decline in demand for this product line or failure to achieve continued market acceptance of existing and new versions of this product line may harm our business and our financial condition. Additionally, unfavorable market conditions affecting this line of business would likely have a disproportionate impact on us in comparison with certain competitors, who have more diversified operations and multiple lines of business. Should this line of business fail to generate sufficient sales to support ongoing operations, there can be no assurance that we will be able to develop alternate business lines.

Our operating results vary significantly from period to period.

We experience fluctuations in our operating results. Some of the principal factors that contribute to these fluctuations include changes in demand for our products; our effectiveness in managing manufacturing processes, costs and inventory; our effectiveness in engineering and qualifying new product designs with our OEM customers and in managing the risks associated with offering those new products into production; changes in the cost and availability of raw materials, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules; macroeconomic and served industry conditions; and events that may affect our production capabilities, such as labor conditions and political instability. In addition, due to the prevailing economic climate and competitive differences between the various market segments which we serve, the mix of sales between our communications, networking, aerospace and defense, space, avionics, industrial and instrumentation market segments may affect our operating results from period to period.

For the years ended December 31, 2022 and 2021, we had net income of $1,798,000 and $1,582,000, respectively.

Our revenues and operating results are highly dependent on the development and growth of demand for our products in the communications, networking, aerospace and defense, space, avionics, instrumentation and industrial markets, which are cyclical. We cannot be certain whether we will generate sufficient revenues or sufficiently manage expenses to sustain profitability.

We have a large customer that accounts

A relatively small number of customers account for a significant portion of our revenues and accounts receivable, and the loss of this customer, orany of these customers, a decrease in itstheir demand for our products, or their insolvency could have a material adverse effect on our results.results of operations or liquidity..

For the year ended December 31, 2022,2023, our largest customera commercial aerospace and defense company, accounted for $8,190,000, or 25.7%,31.4% of the Company's total revenues. The Company’s second largest customer in 2022, a defense contractor,2023 accounted for $4,857,000, or 15.3%,19.0% of the Company's total revenues. Additionally, as of December 31, 2023, four of our largest customers accounted for approximately 76.4% of our accounts receivable balance. The loss of eitherany of these customers, or a decrease in their demand for our products, could have a material adverse effect on our results.

A relatively small number of customers account for a significant portion of our accounts receivable, andor the insolvency of any of these customers could have a material adverse impacteffect on our results of operations or liquidity.

As of December 31, 2022, four of our largest customers accounted for approximately $2,872,000, or 53.8%, of accounts receivable. The insolvency of any of these customers could have a material adverse impact on our liquidity.

Our order backlog may not be indicative of future revenues.

Our order backlog is comprised of orders that are subject to specific production release, including orders under contracts, and purchase orders. Our customers may order products from multiple sources to ensure timely delivery when backlog is particularly long and may cancel or defer orders without significant penalty. They also may cancel orders when business is weak, and inventories are excessive. As a result, we cannot provide assurances as to the

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portion of backlog orders to be filled in any given year, and our order backlog as of any particular date may not be representative of actual revenues for any subsequent period.

Our future rate of growth and profitability are highly dependent on the development and growth of the communications, networking, aerospace and defense, space, avionics, instrumentation and industrial markets, which are cyclical.

In 20222023 and 2021,2022, the majority of our revenues were derived from sales to manufacturers of equipment for the aerospace and defense, aerospace,space, avionics, instrumentation and industrial markets for frequency and spectrum control devices, including indirect sales through distributors and contract manufacturers. During 2023,2024, we expect a significant portion of our revenues to continue to be derived from sales to these manufacturers. Often OEMs and other service providers within these markets have experienced periods of capacity shortage and periods of excess capacity, as well as periods of either high or low demand for their products. In periods of excess capacity or low demand, purchases of capital equipment may be curtailed, including equipment that incorporates our products. A reduction in demand for the manufacture and purchase of equipment for these markets, whether due to cyclical, macroeconomic or other factors, or due to our reduced ability to compete based on cost or technical factors, could substantially reduce our net sales and operating results and adversely affect our financial condition. Moreover, if these markets fail to grow as expected, we may be unable to maintain or grow our revenues. The multiple variables which affect the communications, networking, aerospace and defense, space, avionics, instrumentation and industrial markets for our products, as well as the number of parties involved in the supply chain and manufacturing process, can impact inventory levels and lead to supply chain inefficiencies. As a result of these complexities, we may have limited visibility to forecast revenue projections accurately for the near and medium-term timeframes.

The market share of our customers in the communications, networking, aerospace and defense, space, avionics, instrumentation and industrial markets may change over time, reducing the potential value of our relationships with our existing customer base.

We have developed long-term relationships with our existing customers, including pricing contracts, custom designs and approved vendor status. If these customers lose market share to other equipment manufacturers in the communications, networking, aerospace and defense, space, avionics, instrumentation and industrial markets with whom we do not have similar relationships, our ability to maintain revenue, margin or operating performance may be adversely affected.

We may make acquisitions that are not successful, or we may fail to integrate acquired businesses into our operations properly.

We intend to continue exploring opportunities to buy other businesses or technologies that could complement, enhance, or expand our current business or product lines, or that might otherwise offer us growth opportunities. We may have difficulty finding such opportunities or, if such opportunities are identified, we may not be able to complete such transactions for reasons including a failure to secure necessary financing.

Any transactions that we are able to identify and complete may involve a number of risks, including:

In addition, we may not be able to integrate, operate, maintain or manage, successfully or profitably, our newly acquired operations or employees. We may not be able to maintain uniform standards, controls, policies and procedures, and this may lead to operational inefficiencies.

Any of these difficulties could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are unable to introduce innovative products, demand for our products may decrease.

Our future operating results are dependent on our ability to develop, introduce and market innovative products continually, to modify existing products, to respond to technological change and to customize some of our products

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to meet customer requirements. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to develop and market new products and applications in a timely or cost-effective manner to satisfy customer demand.

Our markets are highly competitive, and we may lose business to larger and better-financed competitors.

Our markets are highly competitive worldwide, with low transportation costs and few import barriers. We compete principally on the basis of product quality and reliability, availability, customer service, technological innovation, timely delivery and price. Within the industries in which we compete, competition has become increasingly concentrated and global in recent years.

Many of our major competitors, some of which are larger than us, and potential competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer support capabilities. If we are unable to successfully compete against current and future competitors, our operating results will be adversely affected.

Our success depends on our ability to retain key management and technical personnel and attracting, retaining, and training new technical personnel.

Our future growth and success will depend in large part upon our ability to recruit highly skilled technical personnel, including engineers, and to retain our existing management and technical personnel. There is a labor shortage in the markets in which we operate which are highly competitive, and some of our operations are not located in highly populated areas. As a result, we may not be able to recruit and retain key personnel. Our failure to hire, retain or adequately train key personnel could have a negative impact on our performance.

We purchase certain key components and raw materials from single or limited sources and could lose sales if these sources fail to fulfill our needsfor any reason, including the inability to obtain these key components or raw materials due to the COVID-19 outbreak.reason.

If single-source components or key raw materials were to become unavailable on satisfactory terms, and we could not obtain comparable replacement components or raw materials from other sources in a timely manner, our business, results of operations and financial condition could be harmed. On occasion, one or more of the components used in our products have become unavailable, resulting in unanticipated redesign and related delays in shipments. Changes in global economic and geopolitical conditions and the ongoing COVID-19 pandemic have disrupted supply chains and the ability to obtain components and raw materials around the world for all companies, including us. We cannot give assurance that we will be able to obtain the necessary components and raw materials necessary to conduct our business. In addition, our suppliers may be impacted by compliance with environmental regulations including RoHSRestriction of Hazardous Substances in Electrical and Electronic Equipment ("RoHS") and Waste Electrical and Electronic Equipment ("WEEE"), which could disrupt the supply of components or raw materials or cause additional costs for us to implement new components or raw materials into our manufacturing processes.

As a supplier to U.S. Government defense contractors, we are subject to a number of procurement regulations and other requirements and could be adversely affected by changes in regulations or any negative findings from a U.S. Government audit or investigation.

A number of our customers are U.S. Government contractors. As one of their suppliers, we must comply with significant procurement regulations and other requirements. Under applicable federal regulations for defense contractors, we arewill be required to comply with the Cybersecurity Maturity Model Certification (“CMMC”) program in the next several years and other similar cybersecurity requirements. We also maintain registration under ITAR for certain of our production facilities. One of those production facilities must comply with additional requirements and regulations for its production processes and for selected personnel in order to maintain the security of classified information. These requirements, although customary within these markets, increase our performance and compliance costs. If any of these various requirements change, our costs of complying with them could increase and reduce our operating margins. To the extent that we are unable to comply with the CMMC or other requirements, our business with the Department of Defense or its prime customers could be at risk.

We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. Government and its agencies such as the Defense Contract Audit Agency and Defense Contract Management Agency. These agencies review our performance under our contracts, our cost structure and our compliance with applicable laws, regulations, and standards, as well as the adequacy of, and our compliance with, our internal control systems and policies. Systems

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that are subject to review include our purchasing systems, billing systems, property management and control systems, cost estimating systems, compensation systems and management information systems. 

Any costs found to be improperly allocated to a specific contract will not be reimbursed or must be refunded if already reimbursed. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business as a supplier to contractors who sell products and services to the U.S. Government. In addition, our reputation could be adversely affected if allegations of impropriety were made against us.

From time to time, we may also be subject to U.S. Government investigations relating to our or our customers' operations and products and are expected to perform in compliance with a vast array of federal laws, including the Truth in Negotiations Act, the False Claims Act, the International Traffic in Arms Regulations promulgated under the Arms Export Control Act, and the Foreign Corrupt Practices Act. We or our customers may be subject to reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition, or result in a diminution in revenue from our customers, if we or our customers are found to have violated the law or are indicted or convicted for violations of federal laws related to government security regulations, employment practices or protection of the environment, or are found not to have acted responsibly as defined by the law. Such convictions or actions could also result in suspension or debarment from serving as a supplier to government contractors for some period of time. Such convictions or actions could have a material adverse effect on us and our operating results. The costs of cooperating or complying with such audits or investigations may also adversely impact our financial results.

Our products are complex and may contain errors or design flaws, which could be costly to correct.

When we release new products, or new versions of existing products, they may contain undetected or unresolved errors or defects. The majority of our products are custom designed for requirements of specific OEM systems. The expected business life of these products ranges from less than one year to more than 10 years depending on the application. Some of the customizations are modest changes to existing product designs while others are major product redesigns or new product platforms.

Despite testing, errors or defects may be found in new products or upgrades after the commencement of commercial shipments. Undetected errors and design flaws have occurred in the past and could occur in the future. These errors could result in delays, loss of market acceptance and sales, diversion of development resources, damage to the Company's reputation, product liability claims and legal action by its customers and third parties, failure to attract new customers and increased service costs.

Communications and network infrastructure equipment manufacturers increasingly rely upon contract manufacturers, thereby diminishing our ability to sell our products directly to those equipment manufacturers.

There is a continuing trend among communications and network infrastructure equipment manufacturers to outsource the manufacturing of their equipment or components. As a result, our ability to persuade these OEMs to utilize our products in customer designs could be reduced and, in the absence of a manufacturer's specification of our products, the prices that we can charge for them may be subject to greater competition.

Future changes in our environmental liability and compliance obligations may increase costs and decrease profitability.

Our present and past manufacturing operations, products, and/or product packaging are subject to environmental laws and regulations governing air emissions, wastewater discharges, and the handling, disposal and remediation of hazardous substances, wastes and other chemicals. In addition, more stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any future regulations might require, or the cost of compliance that would be associated with such regulations.

Environmental laws and regulations may cause us to change our manufacturing processes, redesign some of our products, and change components to eliminate some substances in our products in order to be able to continue to offer them for sale.

We have significant international operations and sales to customers outside of the United States that subject us to certain business, economic and political risks.

We have office and manufacturing space in Noida, India, and a sales office in Hong Kong. Additionally, foreign revenues for 20222023 (primarily to Malaysia) accounted for 29.5%26.9% of our 20222023 consolidated revenues. We anticipate that sales to customers located outside of the United States will continue to be a significant part of our revenues for the foreseeable future. Our international operations and sales to customers outside of the United States subject our operating results and financial condition to certain business, economic, political, health, regulatory and other risks, including but not limited to:

Additionally, to date, very few of our international revenue and cost obligations have been denominated in foreign currencies. As a result, changes in the value of the United States dollar relative to foreign currencies may affect our competitiveness in foreign markets. We do not currently engage in foreign currency hedging activities, but may do so in the future to the extent that we incur a significant amount of foreign-currency denominated liabilities.

We rely on information technology systems to conduct our business, and disruption, failure or security breaches of these systems could adversely affect our business and results of operations.

We rely on information technology ("IT") systems in order to achieve our business objectives. We also rely upon industry accepted security measures and technology to securely maintain confidential information maintained on our IT systems. However, our portfolio of hardware and software products, solutions and services and our enterprise IT systems may be vulnerable to damage or disruption caused by circumstances beyond our control such as catastrophic events, power outages, natural disasters, computer system or network failures, computer viruses, cyber-attacks or other malicious software programs. The failure or disruption of our IT systems to perform as anticipated for any reason could disrupt our business and result in decreased performance, significant remediation costs, transaction errors, loss of data, processing inefficiencies, downtime, litigation and the loss of suppliers or customers. A significant disruption or failure could have a material adverse effect on our business operations, financial performance and financial condition.

Cybersecurity risks and cybercybersecurity incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

Our business could be negatively impacted by cybersecurity events and other disruptions. We face various cybersecurity threats, including threats to our IT infrastructure and attempts to gain unauthorized access to our proprietary or classified information, denial-of-service attacks, as well as threats to the physical security of our facilities and employees, and threats from terrorist acts. In addition, we face cybersecurity threats from entities and persons that may seek to target us through our customers, suppliers and other third parties with whom we do business. Many of these cybersecurity threats are increasingly sophisticated and constantly evolving. Accordingly, we maintain information security staff, policies and procedures for managing risk to our information systems, and we review and update our policies, procedures and practices in light of evolving threats. We conduct employee training on cybersecurity to mitigate persistent and continuously evolving cybersecurity threats. However, there can be no assurance that any such actions, including the timeliness of our efforts to review, update or implement policies, procedures and practices in light of evolving threats, or the safeguards put in place by our customers, suppliers and other parties on which we rely, will be sufficient to detect, prevent and mitigate cybersecurity breaches or disruptions, or the unauthorized release of sensitive information or corruption of data.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our investor relationships. As our reliance on technology increases, so will the risks posed to our information systems, both internal and those we outsource. There is no guarantee that any processes, procedures and internal controls we have implemented or will implement will prevent cyber intrusions, which could have a negative impact on our financial results, operations, business relationships or confidential information.

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Additionally, remote work has become more common among our employees and employees of our third-party service providers and has increased risks to our IT systems and our confidential, proprietary, and sensitive data and that of our third-party service providers as more of those employees utilize network connections, computers, and devices outside of the employer’s premises or network, including working at home, while in transit, and in public locations. Those employees working remotely could expose us and other third-party service providers to additional cybersecurity risks and vulnerabilities as their systems could be negatively affected by vulnerabilities present in external systems and technologies outside of their control.

If we fail to correct any material weakness that we identify in our internal control over financial reporting or otherwise fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). We are required to comply with the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and other rules that govern public companies.

If we identify material weaknesses in our internal control over financial reporting in the future, if we cannot comply with the requirements of the Sarbanes-Oxley Act in a timely manner or attest that our internal control over financial reporting is effective, or if our independent registered public accounting firm cannot express an opinion as to the effectiveness of our internal control over financial reporting when required, we may not be able to report our financial results accurately and timely. As a result, investors, counterparties and consumers may lose confidence in the accuracy and completeness of our financial reports. Accordingly, access to capital markets and perceptions of our creditworthiness could be adversely affected, and the market price of our common stock could decline. In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission (the “SEC”) or other regulatory authorities, which could require additional financial and management resources. These events could have a material and adverse effect on our business, operating results, financial condition and prospects.

Risks Related to Our Securities

The price of our common stock has fluctuated considerably and is likely to remain volatile, in part due to the limited market for our common stock.

From October 7, 2022, the date our common stock began trading on the NYSE American, through December 31, 2022,2023, the high and low closing prices for our common stock were $15.60$38.43 and $8.40,$8.36, respectively. There is a limited public market for our common stock, and we cannot provide assurances that a more active trading market will develop or be sustained. As a result of limited trading volume in our common stock, the purchase or sale of a relatively small number of shares could result in significant price fluctuations and it may be difficult for holders to sell their shares without depressing the market price for our common stock.

Additionally, the market price of our common stock may continue to fluctuate significantly in response to a number of factors, some of which are beyond our control, including the following:

Our officers, directors and 10% or greater stockholders have significant voting power and may vote their shares in a manner that is not in the best interest of other stockholders.

Our officers, directors and 10% or greater stockholders control approximately 38.5%21.4% of the voting power represented by our outstanding shares of common stock as of March 27, 2023.18, 2024. If these stockholders act together, they may be able to exert significant control over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of all of our stockholders.

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Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company more difficult, which acquisition may be beneficial to our stockholders.

Provisions in our certificate of incorporation and by-laws, as well as provisions of the General Corporation Law of the State of Delaware ("DGCL"), may discourage, delay or prevent a merger, acquisition or other change in control of the Company, even if such a change in control would be beneficial to our stockholders. These provisions include prohibiting our stockholders from fixing the number of directors and establishing advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors (the “Board”).

Additionally, Section 203 of the DGCL prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. We have not opted out of the restrictions under Section 203, as permitted under DGCL.

Risks Related to the Separation

We may be unable to achieve some or all of the expected benefits of the Separation, and the Separation may adversely affect our business.

As a new, publicly traded company, we may be more susceptible to market fluctuations and other adverse events. Our performance may not meet expectations for a variety of reasons. While we were a subsidiary of LGL Group, we previously enjoyed certain benefits, including economies of scope and scale in costs, employees and business relationships. These benefits may not be as readily achievable as a stand-alone company. There can be no assurance that the Separation will not adversely affect our business.

Our ability to meet capital needs may be harmed by the loss of financial support from LGL Group, and we may not be able to obtain funds necessary to operate our business.

Our ability to meet capital needs, which depends on the Company’s financial condition and future prospects, may be harmed as a result of the Separation, and we will not be able to access financial support from LGL Group. To the extent we seek funds through accessing equity or debt capital markets, as a standalone company, the cost of financing will depend on many factors, among other things, such as its performance and financial market conditions generally. Accordingly, we may not be able to obtain financing or otherwise raise funds necessary to operate our business on favorable terms, or at all. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay or scale back our acquisition activity and planned capital expenditures, which could adversely impact the business and prospects. In addition, to the extent debt financing, if available, is obtained, we may be subject to operating and financial covenants that may restrict our operations and if unable to generate sufficient cash flow from operations to meet future debt payment obligations, we may be required to attempt to restructure or refinance such debt, raise additional capital or take other actions such as selling assets, or reducing or delaying capital expenditures. There is no assurance that we will be able to effect any such actions or do so on satisfactory terms, if at all, or that such actions would be permitted by the terms of our indebtedness. Further, to the extent that we raise additional funds by issuing equity securities, our stockholders would experience dilution, which may be significant and could cause the market price of our common stock to decline.

As a result of the separation, certain of our directors and officers may have actual or potential conflicts of interest because of their positions or relationships with LGL Group.

As a result of the Separation, Marc J. Gabelli serves as special advisor to our non-executive chairman of the board and also serves as chairman of the board and chiefco-chief executive officer of LGL Group and Michael J. Ferrantino serves as our chief executive officer and as one of our directors and also as a director of LGL Group. Such dual roles could create, or appear to create, potential conflicts of interest when LGL Group and our officers and directors face decisions that could have different implications for the two companies.

In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between LGL Group and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies.

We have limited history of operating as an independent company, and our historical combined and unaudited financial information for periods prior to the Separation is not necessarily representative of the results that we

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would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

Our historical combined and unaudited financial information for periods prior to the Separation included in this Annual Report on Form 10-K was derived from LGL Group’s consolidated financial statements and accounting records and are not necessarily indicative of our future results of operations, financial condition or cash flows, nor do they reflect what our results of operations, financial condition or cash flows would have been as an independent public company during the periods presented. In particular, the historical combined financial information included in this Annual Report on Form 10-K is not necessarily indicative of our future results of operations, financial condition or cash flows.

LGL Group continues to perform functions for us, and we continue to perform functions for LGL Group, on a transitional basis, and as a result we may experience operational disruptions and incur significant costs to perform these functions ourselves following the transition period or be subject to claims and liability.

Prior to the Separation, LGL Group performed many important corporate functions for us, including information technology, shared services, insurance, logistics, human resources, finance and internal audit. In connection with the Separation, we entered into certain arrangements with LGL Group pursuant to which we and LGL Group will continue to provide to each other, on an ongoing basis, certain functions and services that the companies have historically shared. LGL Group may not successfully execute its obligations to us under these arrangements, and any interruption in the functions or services that will be provided to us by LGL Group following the Separation could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, at the end of this transition period, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf. The costs associated with performing or outsourcing these functions may exceed the amounts reflected in our historical combined financial statements that were incurred as a subsidiary of LGL Group. A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, results of operations, financial condition and cash flows.

The obligations associated with operating as an independent public company require significant resources and management attention.

Prior to the Separation, we were not directly subject to the reporting and other requirements of the Exchange Act. As a result of the Separation, we are directly subject to such reporting and other obligations under the Exchange Act and the rules of the NYSE. These reporting and other obligations place significant demands on our management and our administrative and operational resources, including accounting resources, and we have faced and expect to continue to face increased legal, accounting, administrative and other costs and expenses relating to these demands that we had not incurred as a subsidiary of LGL Group. Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We are subject to significant restrictions on our actions in order to avoid triggering significant tax-related liabilities.

The Amended and Restated Tax Indemnity and Sharing Agreement (“Tax Agreement”) by and between the Company and LGL Group generally prohibits us from taking certain actions that could cause the Separation to fail to qualify as a tax-free transaction, including but not limited to, within two (2) years of the Distribution DateSeparation date not entering into any agreement, understanding or arrangement involving the substantial acquisition of stock of the Company or a substantial shift in ownership (by vote or value) of the Company.

If the Separation does not qualify as tax-free for U.S. federal income tax purposes as a result of a breach by us of any covenant or representation made by us in the Amended and Restated Tax Indemnity and Sharing Agreement, we could be subject to significant liability.

If the Separation fails to qualify for tax-free treatment due to a breach by us (or any of our subsidiaries) of any covenant or representation made by us in the Tax Agreement between us and LGL Group, we generally will be required to indemnify LGL Group for all tax-related losses suffered by it. In addition, we will not control the resolution of any tax contest relating to taxes suffered by LGL Group in connection with the Separation, and we may not control the resolution of tax contests relating to any other taxes for which we may ultimately have an indemnity obligation under the Tax Agreement. In the event that LGL Group suffers tax-related losses in connection with the Separation that must

14

be indemnified by us under the Tax Agreement, the indemnification liability could have a material adverse effect on us.

If the Separation fails to qualify for tax-free treatment, for any reason, LGL Group and/or holders of the LGL Group's common stock would be subject to substantial U.S. taxes as a result of the Separation, and we could incur significant liabilities under applicable law or as a result of the Tax Agreement.

None.

You should read the following discussion and analysis together with our audited consolidated financial statements and the accompanying notes. This discussion contains forward-looking statements, including statements regarding our expected financial position, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly under the headings "Caution Concerning Forward-Looking Statements" and "Risk Factors”Factors”.

Overview

MtronPTI is engaged in the designing, manufacturing and marketing of highly-engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits in various applications. MtronPTI’s primary markets are aerospace and defense, aerospace, space, and avionics.

The accompanying consolidated financial statements include the accounts of the Company and all of its majority-owned subsidiaries.

Results of Operations

Factors Which May Influence Results of Operations

We are not aware of any material trends or uncertainties, other than the global economic conditions affecting our industry generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed in Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K.

COVID-19

The COVID-19 pandemic (“COVID”) has had and may continue to have an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. The COVID pandemic continues to present business challenges, and we continue to experience impacts related to COVID, primarily in higher raw material prices, disruptions in global supply chains, delays in supplier deliveries, delays in deliveries to customers, travel restrictions, quarantine restrictions, labor shortages and employee absences.

The ultimate impact of COVID on our operations and financial performance depends on many factors that are not within our control, including, but not limited to, potential subsequent waves of COVID infection or potential new variants and the possible resistance of new variants to currently available vaccines, the effectiveness and adoption of COVID vaccines and therapeutics, governmental, business and individuals’ actions that have been and may in the future be taken in response to the pandemic (including shutdown orders, border closings, restrictions on travel and transport and workplace restrictions) and resulting supplier impacts. In addition, to the extent global vaccination programs do not achieve intended results and a longer period of economic and global supply chain and related disruption continues, the more adverse the impact will be on our business operations, financial performance and results of operations.

Inflation and Rising Interest Rates

During 2022,2023, inflation in the United States acceleratedmoderated and, as of the date of this Report, is currently expected to continue at an elevated levelfall slightly in the near-term. Rising inflationInflation and the resulting higher interest rates may have an adverse impact on our Loan Agreement and general and administrative expenses, as these costs could increase at a rate higher than our revenue. The U.S. Federal Reserve raised the federal funds rate a totalfour times during 2023, with their last increase in July of seven times throughout 2022,2023, resulting in a range from 4.25%5.25% to 4.50%5.50% as of December 31, 2022.2023. It is expected that the Federal Reserve may continue to increaseease the federal funds rate during 20232024 to, among other things, control unemployment while balancing the risks of inflation. As a result, to the extent our exposure to increases in interest rates is not eliminated through interest rate swaps or other protection agreements, such increases may result in higher debt service costs, which will adversely affect our cash flows.

20222023 Compared to 20212022

Consolidated Revenues, Gross Margin and Backlog

Total revenues for the year ended December 31, 20222023 were $31,845,000,$41,168,000, an increase of $5,151,000,$9,323,000, or 19.3%29.3%, from $26,694,000$31,845,000 for the year ended December 31, 2021.2022. The increase in revenue reflects the recovering avionics marketstrong aerospace and strong defense product shipments.

Consolidated gross margin, which is consolidated revenues less manufacturing cost of sales as a percentage of revenues, improved to 35.6%40.7% for the year ended December 31, 20222023 compared to 35.0%35.6% for the prior year. Gross margins improved over last year but were muted by inflationary cost pressures. The margin improvement reflects thein 2023 as compared to 2022 due to increased business volume offset byand the effects of product mix changes, andoffset by inflationary headwinds due to labor and materials cost increases on long term contracts.

As of December 31, 2022,2023, our order backlog was $46,180,000,$47,831,000, an increase of 56.9%3.6% compared to $29,439,000$46,180,000 as of December 31, 2021.2022. Strong 2023 bookings of $42,818,000 following very strong 2022 bookings of $48,586,000 following strong 2021 bookings and the continuing recovery from the avionics marketeffect of increased aerospace and other related COVID pandemic and supply chain issues,defense orders, drove the improvement. This record booking trend in excess of our product shipments reflects strong aerospace and defense orders, most of which are expected to ship during 20232024 and well into 2024.2025.

The backlog of unfilled orders includes amounts based on signed contracts and purchase orders, which are likely to be fulfilled substantially within the next 12 to 24 months. Order backlog is adjusted quarterly to reflect project cancellations, deferrals, revised project scope and cost.We expect to fill a substantial portion of our order backlog as of December 31, 20222023 during 20232024 and 2024,2025, but cannot provide assurances as to what portion of the order backlog will be fulfilled in any given year.

Engineering, Selling and Administrative Expenses

Engineering, selling and administrative expenses for 2023 included a one-time stock option grant to employees for which the Company recognized a stock-based compensation expense of $2,013,000. The Board approved a one-time grant of 183,300 shares to all 185 full-time employees below the officer level with the quantity of shares for each determined based upon their length of time with the Company. This grant was made to align the interests of our employees with those of our stockholders, and to recognize and reward our valued employees for their past and continuing dedication and service to MtronPTI. It is our employees whose present and future contributions will help ensure the continued success of the organization. See Note G - Stock-Based Compensation to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Report for additional details on stock option grants.

Details for engineering, selling and administrative expenses are as follows:

Engineering, selling and administrative costs increased $3,996,000 for the year ended December 31, 2023 compared to the year ended December 31, 2022, as a result of $210,000 of increased engineering costs supporting MtronPTI's research and development activities, $225,000 of increased sales costs due to the increase in revenues, and $3,561,000 of increased administrative costs for 2023. Administrative costs included the impact from the one-time employee stock option grant of $2,013,000, increased legal and SEC costs of $841,000, increased salaries and employee benefits of $579,000 along with increased audit and tax costs of $71,000 and general insurance and other cost increases of $56,000. The legal and SEC cost increase of $841,000 represents the incremental direct costs of being a public company, without comparable amounts from the prior year when results were presented on a standalone basis. Employee compensation and benefit costs were higher due primarily to increased bonuses of $505,000, higher salaries and benefits of $322,000, offset by reduced stock-based compensation expenses of $248,000, excluding the one-time stock option grant noted above. Audit and tax costs increased primarily due to the costs of being a standalone public company.

Operating Income

The Company reported an operating income of $4,299,000 for the year ended December 31, 2023 compared to operating income of $2,875,000 for the year ended December 31, 2022 compared to operating income of $2,114,000 for the year ended December 31, 2021.2022. This increase reflects the higher revenues and effects from product mix changes, with results mutedoffset by inflationary pressures.Engineering,increased engineering, selling and administrative expenses, which were 30.3% of revenue for the year ended December 31, 2023, compared to 26.6% of revenue for the year ended December 31, 2022, compared to 27.1%2022.

Total Other Income (Expense), Net

Total other income (expense), net was income of revenue$100,000 for the year ended December 31, 2021.

Total Other Expense, Net

Total other2023 compared to expense net wasof $280,000 for the year ended December 31, 2022, compared to $1,000 for the year ended December 31, 2021, primarily reflecting excess Separation costs of $219,000 in 2022 which representsrepresented 50% of the excess Separation costs which MtronPTI agreed to share with LGL Group (See Note B – Related Party Transactions to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Report), along with the impact from currency changes.changes.

Income Tax Provision

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, tax benefits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. Significant changes to these estimates may result in an increase or decrease to the tax provision in a subsequent period.

We recorded a tax provision of $797,000$911,000 and $531,000$797,000 for the years ended December 31, 20222023 and 2021,2022, respectively. The income tax provision is based on an estimated annual effective tax rate across the jurisdictions in which we operate.

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Net Income

Net income was $3,489,000 for the year ended December 31, 2023 compared to $1,798,000 for the year ended December 31, 2022 compared to $1,582,000 for the year ended December 31, 2021.2022. Basic and diluted net income per share for the yearsyear ended December 31, 2023 was $1.29 and $1.28, respectively, and for the year ended December 31, 2022 basic and 2021diluted net income per share was $0.67$0.67.

Adjusted EBITDA (a Non-GAAP Measure)

Adjusted EBITDA (as defined below) was $2,425,000 for the quarter ended December 31, 2023 versus $1,114,000 for the quarter ended December 31, 2022, a portion of which was reported on a standalone basis. Adjusted EBITDA was $7,692,000 for the year ended December 31, 2023 versus $4,008,000 for the year ended December 31, 2022, a portion of which was reported on a standalone basis. Adjusted EBITDA excluded excess Separation costs of $28,000 for 2023 and $0.59,$219,000 for 2022. Included within the non-cash stock compensation is $2,013,000 for the impact from the one-time employee stock option grant. Note that adjusted EBITDA for the quarter and year ended December 31, 2022 does not include any adjustments for the potential impact from the additional costs of being a publicly traded company. Management calculated the incremental direct costs of being a public company which do not have any comparable amounts in the prior year when results were presented partially on a standalone basis at $106,000 and $841,000 for the quarter and year ended December 31, 2023, respectively.

Reconciliations of GAAP to Non-GAAP Measures

To supplement our consolidated financial statements presented on a GAAP basis, the Company uses certain non-GAAP measures, including Adjusted EBITDA, which we define as net income before income taxes adjusted to exclude depreciation and amortization expense, interest income and expense, stock-based compensation expense, and other items we believe are discrete events which have a significant impact on comparable GAAP measures and could distort an evaluation of our normal operating performance. These adjustments to our GAAP results are made with the intent of providing both management and investors with a more complete understanding of the underlying operational results and trends and our marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net earnings or diluted earnings per share prepared in accordance with GAAP.

Reconciliation of GAAP Income Before Income Taxes to EBITDA and Non-GAAP Adjusted EBITDA:

Liquidity and Capital Resources

As of December 31, 20222023 and 2021,2022, cash and cash equivalents were $926,000$3,913,000 and $2,635,000,$926,000, respectively. The decreaseincrease was due primarily to our financial results following the Separation, as the cash balance at Separation exceeding $1,000,000 was retained by LGL Group.

Cash provided by operating activities was $2,042,000$4,405,000 and $2,960,000$2,042,000 for the years ended December 31, 20222023 and 2021,2022, respectively. The decreaseincrease was largely due to the increases in receivableour improved financial results, and inventory levels in 2022 as compared to 2021, offset by an increasea decrease in accounts payable and accrued expenses.expenses in 2023 as compared to 2022, partially offset by increases in inventory. Inventory increased due to supply chain constraints and as a result of a significantan increase in our order backlog.backlog, while payables and accruals decreased due to the efficient use of available cash.

Cash used in investing activities for the years ended December 31, 2023 and 2022 was $1,281,000 and 2021 was $936,000, and $1,099,000, respectively, and related entirely to capital expenditures, which were primarily used for new and upgraded production equipment to improve our costs and efficiency.

Cash used in financing activities for the years ended December 31, 2023 and 2022 was $137,000 and 2021 was $2,815,000, and $1,682,000, respectively, andwith the 2023 amount related to the forfeiture of shares to pay taxes while the 2022 amount resulted almost exclusively from payments to LGL Group and its subsidiaries.

As of December 31, 2022,2023, our consolidated working capital was $9,458,000,$13,803,000, compared to $9,081,000$9,458,000 as of December 31, 2021.2022. As of December 31, 2023, we had current assets of $18,187,000, current liabilities of $4,384,000 and a ratio of current assets to current liabilities of 4.15 to 1.00. As of December 31, 2022, we had current assets of $14,314,000, current liabilities of $4,856,000 and a ratio of current assets to current liabilities of 2.95 to 1.00. As of December 31, 2021, we had current assets of $12,093,000, current liabilities of $3,012,000 and a ratio of current assets to current liabilities of 4.01 to 1.00. Management continues to focus on efficiently managing working capital requirements to match operating activity levels and will seek to deploy the Company’s working capital where it will generate the greatest returns.

We believe that existing cash and cash equivalents, marketable securities and cash generated from operations will provide sufficient liquidity to meet our ongoing working capital and capital expenditure requirements for the next 12 months from the date of this filing. The Company’s management continues to strive for profitability both internally and through acquisition.

On June 15, 2022, we entered into a loan agreement (the “Loan Agreement”) for a revolving line of credit with Fifth Third Bank, National Association, for up to $5.0 million bearing interest at SOFR plus a margin of 2.25%, with a SOFR floor of 0.00%. The Loan Agreement has a maturity date of June 15, 2025 and contains certain financial covenants based on the following criteria: (a) Minimum Fixed Charge Coverage Ratio; (b) Minimum Current Ratio; and (c) Minimum Tangible Net Worth (each as defined in the Loan Agreement). All loans pursuant to the Loan Agreement will be secured by a continuing and unconditional first priority security interest in and to any and all property of the Company. See Note E – Revolving Credit Agreement into the Notes to Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Report for details of the Loan Agreement.

Our Board has adhered to a practice of not paying cash dividends. This policy takes into account our long-term growth objectives, including our anticipated investments for organic growth, potential acquisitions or other strategic ventures and stockholders' desire for capital appreciation of their holdings. No cash dividends are expected to be paid for the foreseeable future.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. Our significant accounting policies are more fully described in Note A – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies into the Notes to Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Report. Certain accounting policies require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, and the effects of revisions are reflected in the financial statements in the period in which they are

20

determined to be necessary. The accounting policies described below are those that most frequently require us to make estimates and judgments and, therefore, are critical to understanding our results of operations.

Income Taxes

We account for income taxes in accordance with Accounting Standards Codification Topic 740 “Income Taxes” (“ASC 740”), which requires an asset and liability approach for the financial accounting and reporting of income taxes. Under this method, deferred income taxes are recognized for the expected future tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. These balances are measured using the enacted tax rates expected to apply in the year(s) in which these temporary differences are expected to reverse. The effect of a change in tax rates on deferred income taxes is recognized in income in the period when the change is enacted.

Based on consideration of all available evidence regarding their utilization, we record net deferred tax assets to the extent that it is more likely than not that they will be realized. Where, based on the weight of all available evidence, it is more likely than not that some amount of a deferred tax asset will not be realized, we establish a valuation allowance for the amount that, in our judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. In reaching such conclusions, we consider available positive and negative evidence including past operating results, projections of future taxable income, the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards. Our projections of future taxable income include estimates and assumptions regarding our income and costs, as well as the timing and amount of reversals of taxable temporary differences.

We account for unrecognized tax benefits in accordance with ASC 740, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation, based solely on the technical merits of the position. The tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

During the periods prior to the Separation that are presented in the accompanying Consolidated and Combined Financial Statements, the Company's income tax expense and deferred tax balances werewas included in LGL Group’s income tax returns. Income tax expense and deferred tax balances contained in the accompanying Consolidated and Combined Financial Statements for periods prior to the Separation areis presented on a separate return basis, as if the Company had filed its own income tax returns. As a result, actual tax transactions included in LGL Group’s consolidated financial statements may or may not be included in the accompanying Consolidated and Combined Financial Statements of the Company. Similarly, the tax treatment of certain items reflected in the accompanying Consolidated and Combined Financial Statements of the Company may or may not be reflected in LGL Group’s consolidated financial statements and income tax returns. The taxes recorded in the accompanying Consolidated and Combined Statements of Operations for periods prior to the Separation are not necessarily representative of the taxes that may arise in the future when the Company files its income tax returns independent from LGL Group's returns. Post-Separation, the Company filed a consolidated U.S. federal income tax return as well as separate and combined income tax returns in various state, local and international jurisdictions. Income tax expense contained in the accompanying Consolidated and Combined Financial Statements for the period after the Separation is based on the consolidated results of the Company on a standalone basis.

Inventories

We account for inventories at the lower of cost or net realizable value using the FIFO (first-in, first-out) method.

Inventory reserves are determined based on estimated losses that result from inventory that becomes obsolete or for which the Company has excess inventory levels. In determining these estimates, the Company performs an analysis on current demand and usage for each inventory item over historical time periods. Based on that analysis, the Company reserves a percentage of the inventory amount within each time period based on historical demand and usage patterns of specific items in inventory. Actual experience could differ from the amounts estimated requiring adjustments to inventory valuation in future periods.

Item 7A.Quantitative and Qualitative

Not applicable as the Company is a smaller reporting company.

M-TRON INDUSTRIES, INC.

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

M-TRON INDUSTRIES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

See Accompanying Notes to Consolidated and Combined Financial Statements.

M-TRON INDUSTRIES, INC.

CONSOLIDATED AND COMBINED BALANCE SHEETS

(Dollars in Thousands, Except per Share Amounts)

See Accompanying Notes to Consolidated and Combined Financial Statements.

26

M-TRON INDUSTRIES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Thousands)

See Accompanying Notes to Consolidated and Combined Financial Statements.

27

M-TRON INDUSTRIES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

See Accompanying Notes to Consolidated and Combined Financial Statements.

28

M-TRON INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

A.Description of Business, Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

M-tron Industries, Inc. (the “Company”, “we”, “our” or “us”) was founded in 1965 and is engaged in the designing, manufacturing and marketing of highly engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits in various applications.

The Company’s operations include its two principal subsidiaries, (1)subsidiaries: Piezo Technology, Inc. ("PTI"), and (2) M-tron Asia, LLC ("Mtron"). The Company has operations in Orlando, Florida; Yankton, South Dakota; and Noida, India, and has a sales officesoffice in Austin, Texas and Hong Kong. The Company and its subsidiaries currently operate together as a single group under the MtronPTI brand (“Mtron PTI”MtronPTI”).

The Company offers a wide range of precision frequency control and spectrum control solutions including radio frequency (“RF”), microwave and millimeter wave filters; cavity, crystal, ceramic, lumped element and switched filters; high performance and high frequency OCXOs, integrated PLL OCXOs, TCXOs, VCXOs, low jitter and harsh environment oscillators; crystal resonators, Integrated Microwave Assemblies (IMA), and state-of-the-art solid state power amplifier products.

Impact of MtronPTI’s

MtronPTI’s Separation

On August 3,October 7, 2022, The LGL Group, Inc. (“LGL Group” or “LGL”) announced that its board of directors approved the previously announced separation of the MtronPTI business into an independent, publicly traded companyfrom The LGL Group, Inc. ("LGL" or "LGL Group") was completed (the "Separation"). Prior to the Separation, LGL Group operated its electronic instruments business segment through its wholly owned subsidiary, Precise Time and Frequency, LLC (“PTF”) and its electronic components business segment through MtronPTI.

On October 7, 2022 (the “Distribution Date”), the Separation of the MtronPTI business was completed and the Company became an independent, publicly traded company trading on the NYSE American under the stock symbol "MPTI."

The Separation was completed through LGL Group’s distribution (the “Distribution”) of 100% of the shares of the Company’s common stock to holders of LGL Group's common stock as of the close of business on September 30, 2022, the record date for the Distribution. As a result of the Distribution, LGL Group's stockholders of record received one-half share of the Company's common stock for every share of LGL Group's common stock held by them. LGL Group retained no ownership interest in the Company following the Separation.

Basis of Presentation - Consolidated and Combined Financial Statements

The Company’s financial statements for periods through the Separation are combined financial statements prepared on a “carve-out” basis as discussed below. The Company’s financial statements for the period from October 7, 2022 through December 31, 20222023 are consolidated financial statements based on the reported results of the Company as a standalone company.

The Consolidated and Combined Financial Statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These Consolidated and Combined Financial Statements may not be indicative of the Company’s future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had the Company operated as an independent company during the periods presented.

Basis of Presentation – Prior to Separation

Through the Separation date, the Company's combined financial statements are prepared on a "carve-out" basis. The Consolidated and Combined Financial Statements have been derived from the consolidated financial statements and accounting records of LGL Group in conformity with GAAP.

The Consolidated and Combined Financial Statements include the accounts of the Company and all of its majority-owned subsidiaries. Intercompany transactions and accounts have been eliminated. Transactions between the Company and LGL Group have been included in these Consolidated and Combined Financial Statements. For those transactions between the Company and LGL Group that have been historically settled in cash, the Company has

29

reflected such balances in the Consolidated and Combined Balance Sheets as Due from Related Party. The aggregate net effect of transactions between the Company and related parties that have been historically settled other than in cash are reflected in the Consolidated and Combined Balance Sheets as Net Investment by LGL Group, Inc. and in the Consolidated and Combined Statements of Cash Flows as Net Transfers from LGL Group, Inc. For additional information, see Note B – Related Party Transactions.

The Consolidated and Combined Balance Sheets include certain LGL Group assets and liabilities that are specifically identifiable or otherwise attributable to the Company.

The debt and associated interest expense in these Consolidated and Combined Financial Statements relate to third-partythird-party borrowings under a revolving credit agreement specifically attributable to legal obligations of the Company.

The Cash and Cash Equivalents held by LGL Group at the corporate level are not specifically identifiable to the Company and, therefore, have not been reflected in the Company’s Consolidated and Combined Balance Sheets.

Cash and Cash Equivalents in the Consolidated and Combined Balance Sheets represent Cash and Cash Equivalents held by the Company at the respective period-ends.

The Consolidated and Combined Statements of Operations include an allocation for certain corporate and shared service functions historically provided by LGL Group, including, but not limited to, executive oversight, accounting, tax, and other shared services. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of consolidated sales or other measures considered to be a reasonable reflection of the historical utilization levels of these services. Management believes the assumptions underlying our Consolidated and Combined Financial Statements, including the assumptions regarding the allocation of general corporate expenses from LGL Group, are reasonable. Nevertheless, our Consolidated and Combined Financial Statements may not include all of the actual expenses that would have been incurred and may not reflect our results of operations, financial position and cash flows had we operated as a standalone company during the periods presented. Actual costs that would have been incurred if we had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.

During the periods prior to the Separation that are presented in these Consolidated and Combined Financial Statements, the Company’s income tax expense and deferred tax balances havehas been included in the LGL Group’ income tax returns. Income tax expense and deferred tax balances contained in the Consolidated and Combined Financial Statements arefor periods prior to the Separation is presented on a separate return basis, as if the Company had filed its own income tax returns. The taxes recordedPost-Separation, the Company filed a consolidated U.S. federal income tax return as well as separate and combined income tax returns in various state, local and international jurisdictions. Income tax expense contained in the Consolidated and Combined Financial Statements of Operations are not necessarily representativefor the period after the Separation is based on the consolidated results of the taxes that may arise in the future when the Company files its income tax returns independent from LGL Group’s income tax returns.on a standalone basis.

Uses of Estimates

The preparation of the Consolidated and Combined Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with no maturity or with a maturity of less than three months when purchased.

Accounts Receivable

Accounts receivable consists principally of amounts due from both domestic and foreign customers. Credit is extended based on an evaluation of the customer's financial condition and collateral is not required. In relation to export sales, the Company requires letters of credit supporting a significant portion of the sales price prior to production to limit exposure to credit risk. Certain credit sales are made to industries that are subject to cyclical economic changes. 

The Company maintains allowancesan allowance for doubtful accountscredit losses for estimated losses resulting from the inability of its customers to make required payments. These allowances are maintained at a level that management believes is sufficient to cover potentialuncollectible accounts receivable. Our reserves for estimated credit losses. Estimateslosses are based onupon historical experience, specific customer collection experience,issues, current trends, credit policyconditions and reasonable and supportable forecasts that affect the relationship between accounts receivable and revenues. In determining these estimates,collectability of the Company examines historical write-offsremaining cash flows over the contractual terms of itsour receivables and reviews each customer'sother financial assets. Accounts are written off against the allowance account when they are determined to identify any specific customerno longer be collectible.

30

collection issues. If the financial condition

Inventories

Inventories are valued at the lower of cost or net realizable value using the FIFO (first-in, first-out)(first-in, first-out) method.

The Company maintains a reserve for inventory based on estimated losses that result from inventory that becomes obsolete or for which the Company has excess inventory levels. In determining these estimates, the Company performs an analysis on current demand and usage for each inventory item over historical time periods. Based on that analysis, the Company reserves a percentage of the inventory amount within each time period based on historical demand and usage patterns of specific items in inventory.

Property, Plant and Equipment, Net

Property, plant and equipment are recorded at cost less accumulated depreciation and include expenditures for major improvements. Maintenance and repairs are charged to operations as incurred. Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range from 5 years to 35 years for buildings and improvements, and from 3 years to 10 years for other fixed assets. Property, plant and equipment are periodically reviewed for indicators of impairment. If any such indicators were noted, the Company would assess the appropriateness of the assets' carrying value and record any impairment at that time.

Depreciation expense was $797,000 for 2023 and $671,000 for 2022 and $488,000 for 2021..

Intangible Assets

Intangible assets are recorded at cost less accumulated amortization. Amortization is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range up to 10 years. The intangible assets consist of intellectual property and goodwill. The net carrying value of the amortizable intangible assets was $58,000$5,000 and $112,000$58,000 as of December 31, 2022 2023 and 2021,2022, respectively. The remaining balance amortizable intangible assets of $5,000 will be amortized during 2024. Goodwill, which is not amortizable, was $40,000 as of both December 31, 2022 2023 and 2021.2022.

The estimated aggregate amortization expense for intangible assets, excluding goodwill, for each of the remaining years of the estimated useful life is as follows (in thousands):

Warranties

The Company offers a standard one-yearone-year warranty. The Company tests its products prior to shipment in order to ensure that they meet each customer's requirements based upon specifications received from each customer at the time its order is received and accepted. The Company's customers may request to return products for various reasons, including, but not limited to, the customers' belief that the products are not performing to specification. The Company's return policy states that it will accept product returns only with prior authorization and if the product does not meet customer specifications, in which case the product would be replaced or repaired. To accommodate the Company's customers, each request for return is reviewed; and if and when it is approved, a return materials authorization ("RMA") is issued to the customer.

Each month, the Company records a specific warranty reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns resulting from a product not meeting specifications or being non-functional have been de minimis. As of December 31, 2022 and 2021, accrued warranty reserve was $95,000and $80,000, respectively.

Revenue Recognition

The Company recognizes revenue from the sale of its products in accordance with the criteria in Accounting Standards Codification (“ASC”) 606,Revenue from Contracts with Customers, which are:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

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Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company meets these conditions upon the Company’s satisfaction of the performance obligation, usually at the time of shipment to the customer, because control passes to the customer at that time. Our standard payment terms for customers are net due within 30 days, with a few exceptions, none regularly exceeding 60 days.

The Company provides disaggregated revenue details by geographic markets in Note J – Domestic and Foreign Revenues.

The Company offers a limited right of return and/or authorized price protection provisions in its agreements with certain electronic component distributors who resell the Company's products to original equipment manufacturers or electronic manufacturing services companies. As a result, the Company estimates and records a reserve for future returns and other charges against revenue at the time of shipment consistent with the terms of sale. The reserve is estimated based on historical experience with each respective distributor. These reserves and charges are immaterial as the Company does not have a history of significant price protection adjustments or returns. The Company provides a standard assurance warranty that does not create a performance obligation.

Practical Expedients:

Shipping Costs

Amounts billed to customers related to shipping and handling are classified as revenue, and the Company's shipping and handling costs are included in manufacturing cost of sales.

Research and Development Costs

Research and development costs are charged to operations as incurred. Such costs were $2,216,000 for 2023 and $2,006,000 for both 2022 and 2021,, and are included within engineering, selling and administrative expenses.

Stock-Based Compensation

The Company measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the requisite service period, typically the vesting period.

The Company estimates the fair value of stock options on the grant date using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. There is no expected dividend rate. Historical Company information was theThe basis for the expected volatility assumption includes historical Company volatility and that of its former parent blended with peer group volatility as the Company believes that theCompany's historical volatility overwas limited as a recently public company, did not fully cover the life of the option, is indicativeand that blending its historical volatility with peer data provides a reasonable indication of expected volatility in the future. The risk-free interest rate is based on the U.S. Treasury zero-couponzero-coupon rates with a remaining term equal to the expected term of the option. The Company records any forfeitures in the period that the shares are forfeited.

Restricted stock awards are measured at the fair value of the Company's common stock on the date of the grant and recognized over the respective service period.

Earnings Per Share

The Company computes earnings per share in accordance with ASC 260,Earnings Per Share. Basic earnings per share is computed based on the weighted-average number of shares of common sharesstock outstanding. Diluted earnings per share include the weighted-average effect of dilutive options and restricted stock on the weighted-average shares outstanding.

On

As a result of the Separation, on October 7, 2022, the Separation was achieved through LGL Group's distribution of 100% of the shares of the Company's common stock to holders of LGL Group's common stock as of the close of business on the record date of September 30, 2022. LGL Group's stockholders of record received one-half share of the Company's common stock for every share of LGL Group's common stock held by them. As a result, on October 7, 2022, the Company had 2.67 million shares of common stock outstanding. This share amount is being utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation. After the Separation, actual outstanding shares are used to calculate both basic and diluted weighted-average number of shares of common stock outstanding.

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Options representing 9,710183.300 shares were excluded from the below calculation of weighted average shares outstanding because they would have been anti-dilutive.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, taxes currently payable or refundable are accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the Company’s Consolidated and Combined Statement of Operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

The Global Intangible Low-Taxed Income ("GILTI") provisions of the Tax ReformCuts and Jobs Act of 2017, enacted on December 22, 2017 (the “Tax Cuts and Jobs Act”), require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. An accounting policy election is available to either account for the tax effects of GILTI in the period that is subject to such taxes or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to such taxes. The Company has elected to account for the tax effects of these provisions in the period that is subject to such tax, and the impact was reflected in the Company’s 2023 and 2022 provision. provisions.

In determining the Company’s provision for income taxes, the Company considers permanent differences between book and tax income and statutory income tax rates.

The Company follows a two-steptwo-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and for which actual outcomes may differ from forecasted outcomes. The Company's policy is to include interest and penalties related to uncertain tax positions in income tax expense.

Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174.174 of the Internal Revenue Code of 1986, as amended (the “IRC”). While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year15-year period. R&E activities are broader in scope than qualified research activities that are considered under IRC Section 41 (relating to the research tax credit).

The Company includes its tax contingencies accrual, including accrued penalties and interest, in Other Long-term Liabilities on the Consolidated and Combined Balance Sheets unless the liability is expected to be paid within one year. Changes to the tax contingencies accrual, including accrued penalties and interest, are included in Income Tax Provision on the Consolidated and Combined Statements of Operations.

Concentration Risks

For the year ended December 31, 2022,2023, the Company's largest customera commercial aerospace and defense company, accounted for $8,190,000,$12,921,000, or 25.7%31.4%,of the Company's total revenues, compared to $7,838,000,$8,190,000, or 29.4%25.7%, of the Company’s total revenues for the year ended December 31, 2021.2022. The Company’s second largest customer for

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the year ended December 31, 2022, a defense contractor,2023 accounted for $4,857,000$7,822,000, or 19.0%, or 15.3%,of the Company's total revenues, compared to $3,138,000,$4,857,000, or 11.8%15.3%,of the Company’s total revenuesfor the year ended December 31, 2021.2022.

A significant portion of the Company's accounts receivable is concentrated with a relatively small number of customers. As of December 31, 2023, four of the Company's largest customers accounted for approximately $3,774,000, or 76.4%, of accounts receivable. As of December 31, 2022, four of the Company's largest customers accounted for approximately $2,872,000, or 53.8%, of accounts receivable. As of December 31, 2021, four of the Company's largest customers accounted for approximately $2,568,000, or 62.3%, of accounts receivable. The Company carefully evaluates the creditworthiness of its customers in deciding to extend credit and utilizes letters of credit to further limit credit risk for export sales. As a result of these policies, the Company has experienced very low historical bad debt expense and believes the related risk to be minimal.

At various times throughout the year and at December 31, 2022 2023 and 2021,2022, some deposits held at financial institutions were in excess of federally insured limits. The Company has mitigated its risk through placing excess cash balances in a US Treasury money market fund and has not experienced any losses related to these balances.

Segment Information

The Company reports segment information in accordance with ASC 280,Segment Information ("ASC 280"). ASC 280 requires companies to report financial and descriptive information for each identified operating segment based on management's internal organizational decision-making structure. Management has identified the Company’s only segment as electronic components, and has determined that it does not operate its businesses on a geographic basis which might otherwise require segment reporting.

Impairments of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker's estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset.

The Company performed an assessment to determine if there were any indicators of impairment as a result of the operating conditions resulting from the coronavirus (“COVID-19”) pandemic at the end of each 20222023 fiscal quarter, including at December 31, 2022. 2023. The Company concluded that, while there were events and circumstances in the macro-environment that did impact us, we did not experience any entity-specific indicators of asset impairment and no triggering events occurred.

Financial Instruments

Cash and cash equivalents, trade accounts receivable, trade accounts payable and accrued expenses are carried at cost which approximates fair value due to the short-term maturity of these instruments.

Foreign Currency Translation

The assets and liabilities of international operations are remeasured at the exchange rates in effect at the balance sheet date for monetary assets and liabilities and at historical rates for nonmonetary assets and liabilities, with the related remeasurement gains or losses reported within the consolidated statement of operations. The results of international operations are remeasured at the monthly average exchange rates. The Company's foreign subsidiaries and respective operations' functional currency is the U.S. dollar. The Company has determined this based upon the majority of transactions with customers as well as intercompany transactions and parental support being based in U.S. dollars. The Company has recognized a remeasurement gain of $71,000 and loss of $82,000 in 2023and $11,000 in 2022 and 2021,, respectively, which is included within other income (expense), net in the Consolidated and Combined Statements of Operations.

Recently Issued Accounting Pronouncements

In June 2016, November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, “Improvements to Reportable Segment Disclosures,” effective for fiscal years beginning after December 15, 2023. The ASU 2016-13,adds disclosure requirements for segment expense information. In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” effective for annual periods beginning after December 15, 2024. The ASU requires disclosure of disaggregated income tax information, including the effective tax rate reconciliation and income taxes paid. There are other ASUs that have been issued by the FASB but are not yet effective. We expect to implement these new standards by their effective dates, and do not expect their adoption to have a material impact on our results of operations, financial condition or cash flows.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13),” which changes the impairment model for most financial assets. The standard replaces the incurred loss model with the current expected credit loss (“CECL”)

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model to estimate credit losses for financial assets. The Company adopted the provisions of this standard on January 1, 2023, with minimal effect on its financial statements.

B. Related Party Transactions

The Consolidated and Combined Financial Statements are prepared on a standalone basis through the date of Separation and have been derived from the consolidated financial statements and accounting records of LGL Group through the date of Separation. The following discussion summarizes activity between the Company and LGL Group prior to the Separation.

Allocation of General Corporate Expenses

For purposes of preparing these Consolidated and Combined Financial Statements on a “carve-out” basis, for periods prior to the Separation we have allocated a portion of LGL Group’s corporate expenses totaling $946,000 and $921,000 to the Company for the yearsyear ended December 31, 2022 and 2021, respectively, which are recorded within engineering, selling and administrative expenses. See Note A – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies for a discussion of the methodology used to allocate corporate-related costs for purposes of preparing these Consolidated and Combined Financial Statements on a “carve-out” basis.

Due to and from Related Parties

Balances between the Company and LGL Group that are derived from transactions that have been historically cash settled are reflected in the Consolidated and Combined Balance Sheets as Due from related party. Balances between the Company and LGL Group, Inc. or its affiliates derived from transactions that have been historically settled other than in cash are included in Net Investment by The LGL Group, Inc. within Equity on the Consolidated Combined Balance Sheets.

Net Transfers to LGL Group, Inc.

The following table presents the components of Net Transfers to LGL Group, Inc. in the 2022 and 2021 Consolidated and Combined Statements of Stockholders’ Equity:Equity for the year ended December 31, 2022: